Wednesday, July 25, 2012
Industrials Lead the Market on the Backs of BA and CAT
Stocks end the day on a sour note with action dominated by reaction to earnings. Economic news from new home sales did not help matters, but dip buyers were on the prowl. BA and CAT helped the Dow Jones Industrial Average lead the way while AAPL weighed on the technology heavy NASDAQ. Remove earnings from the picture and you are left with a pretty dull day of trading. Despite the mixed results from stocks the VIX fell on the day as fear left the market once again. Ben Bernanke’s Federal Reserve put on the market seems to keep this market from falling apart. When you boil it down today was simply a “nothing” day. Last hour of trading saw the NASDAQ move from its high of the day right back to the mid-point of the trading session. Yesterday’s last half hour of trading was supported by rumors of the Federal Reserve taking action sooner rather than later. At this point, how much more can the Fed do? Is another round of QE going to do much of anything? Rather than hand out another $400-600 billion to banks why not hand out $5,000 to every taxpayer (those who paid taxes) making under $250,000? Would that not help solve the problem? At this point, the banks have been bailed out enough time for the consumer to get something! By the way, while giving out free money may sound good in reality it is a terrible idea. It is a short term fix that solves very little for the long haul. It is highly unlikely we’ll see either the Federal Reserve or Washington DC do anything that would solve our fiscal issues. Money printing prolongs the agony and DC simply cannot agree too much of anything. At this point, the market believes in the Federal Reserve put and you see it whenever there is a rumor regarding action. We’ll focus on the price action of the market and the stocks we follow. Price action continues to favor the weak side at the moment and until we get a big volume move in either direction we are playing it safe. Always make sure you know your exits to both winning and losing trades. Enjoy the market tomorrow!